By Aditya Raghunath
Investing.com -- At a time when Indian brokerages like Motilal Oswal (NS:MOFS) have given a price target of Rs 350 to Tata Motors (NS:TAMO), an upside of almost 10% from its Friday closing price of Rs 319, there’s sobering news for the stock from Malaysia.
Brokerage firm Maybank Kim Eng Securities, a subsidiary of Malaysian Maybank, says the fair value of Tata Motors is Rs 160, almost 50% below its closing price on Friday. The firm says concerns over JLR (Jaguar Land Rover) do not merit a value of Rs 319.
A note by the firm said, “The concern on its high debt levels remains and the need to incur elevated CAPEX due to a shift to electric vehicles in the EU by 2030 will pressure its cash flows. Tata Motor’s EV/Ebitda of 6x FY22E is at a premium to European peers and versus its long term EV/Ebitda of 4x is unjustified.”
Investing.com had written about how Tata Motors stock has risen 78% since January 1, 2021. For FY20, around 20% of Tata Motors sales were from its Indian operations while the rest was from JLR. The Maybank note says that the company’s 15% EBITDA (earnings before interest, tax, depreciation and amortization) is not sustainable because input prices (like manpower and materials) have increased, and as the world recovers from the pandemic, sales and administrative expenses will also go up to pre-COVID levels.